India is a key part of international subscription growth: Netflix

Reed Hastings sat down with ET during his visit to India for the Economic Times Global Business Summit to talk about progress it has made in India, future of the studio business and advise for startups.

"We will evolve over the years to do more languages and more Indian content, again both for India and for around the world. "

NEW DELHI: Streaming service Netflix is disrupting the entertainment business across the world, producing cult hits like ‘House of Cards’ and ‘Stranger Things’ with a budget of $8 billion to produce original shows in 2018. With over 117.5 million subscribers in over 190 countries who consume over 140 million hours of TV shows and movies per day, the company was able to grow its streaming revenue by 36% to over $11.6 billion, adding 24 million new members. On the back of this growth, the company has seen its share price double in the last 12 months, helping it reach a market capitalisation of $120 billion.

The company is led by Reed Hastings, a serial entrepreneur who has helped transition the company from a mail order business for DVDs to a technology and content powerhouse. The 57 year old entrepreneur sat down with ET during his visit to India for the Economic Times Global Business Summit to talk about progress it has made in India, future of the studio business and advise for startups. Edited excepts:

Economic Times (ET): It’s been two years since you entered India. How has been the growth and the experience as the Indian market can stun players in both good ways and bad ways…
Reed Hastings (RH): We launched two years ago and we are really early, with Internet just starting to develop well. We only supported international credit cards, just had Hollywood content.

But now, in the last two years, we have expanded and can take all the 250 million local debit and credit cards . We have added a lot of content, from all around the world.

Of course, we have invested in developing shows here, both for India and to export around the world. We just added a movie last week, Love Per Square Foot. It is doing well in India, which is no surprise, but it is also doing well in the US and the UK.

We can give Indian film makers a voice to the world. We have opened up a Mumbai office six months ago.

The very fortunate thing is that reduction in data rates in India has been phenomenal and like nowhere else in the world driven by Reliance Jio and the competition to it.

ET: Can you tell us about how many subscribers you have and how have those numbers grown?
RH: What we can tell is that international segment as a whole is over 60 million and grown over 40% over year. India is a key part of that and we are continuing to see that success throughout the world.

ET: Initially, when Netflix launched in India, you said the market that you are targeting is the top 10-20 million customers. With two years here, have you thought about experimenting with freemium service, which players like Hotstar have?
RH: We are sticking with our model but we are expanding as well by adding a lot more Hindi content. But it’s still English and Hindi, so we are still just in part of the market. Remember that Hotstar is very broad with sport rights, so is Youtube.

There is no change to that strategy, which has worked around the world. It doesn't mean that we will win the market or beat anyone else, cause others are doing great content as well. In the US, HBO just announced their numbers and they have got record growth.

What’s unique about the Indian market is the evolution of pay television. It is extremely inexpensive and advertisement supported. So, basically everything at home has a lot of ads in it, while Netflix is the only ad free network.

It’s a good market, a different market and we just don't compete for advertisement revenues. We will evolve over the years to do more languages and more Indian content, again both for India and for around the world.

ET: Is regional language content something you have started working on?
RH: Right now we are just English and Hindi. We have got little samples but nothing substantial.

ET: You have outlined a $8 billion budget for content this year, which is a lot of money for content. How much are you spending here?
RH: It’s not enough. Next year, it will be higher.

We can look at it by the number of shows. We have six shows (in India), which have already been announced and more coming. That is not as big for us as UK and Japan, but it is very substantial.

ET: How do you think Fox-Disney deal will change the media landscape?
RH: It is a big deal. If you look at the movie side, there have been six major Hollywood studios for almost a 100 years, which has been stable. But now things have changed with the internet, and we are a part of that. This is causing them to think about things and explore opportunities.

ET: There is a two-way race, with some content companies trying to become technology companies other way round as well. Who do you think will win?
RH: Clearly, its not all gonna be about one side, which is if you know tech, you win, or content, you win.

And if you think why Apple was so popular was understanding fashion and technology. They could sell technology like fashion in a way no tech company had ever done. And they understood technology better than any fashion company, which has allowed them to become the most valuable company in the world.

I don’t know if we will be able to follow that but we are working on technology and content.
ET: Netflix is really known for the culture it has built. As Indian startups transition to becoming companies, what advise will you give them?
RH: The big tension in growing a company is between flexibility and efficiency. So, everybody seeks efficiency and they don’t realise how much that hurts flexibility. Eventually, a market changes and there is a new competitor, then you really need the flexibility to adjust. But if you have become too efficient and process oriented then it becomes very hard. Remembering how valuable flexibility is, is important. Don't be obsessed by efficiency and but by flexibility.

For example, we don't have annual budget but rolling budgets, which are constantly re-planned. We value forecasting, of what things will be not trying to do the annual plan and see if we have spent that much and generated revenues according to the plan.

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